Day Trading Trading Basics 2

Question 1

What does the bid-ask spread represent in day trading?

Accepted Answer

The difference between the highest buy price and lowest sell price

Answer

The bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask).

Question 2

Which order type guarantees execution but NOT a specific price?

Accepted Answer

Market order

Answer

A market order executes immediately at the best available price but does not guarantee the exact price you receive.

Question 3

What is 'slippage' in the context of day trading?

Accepted Answer

The difference between expected and actual execution price

Answer

Slippage occurs when a trade executes at a different price than expected, often due to fast-moving markets or low liquidity.

Question 4

What does 'going long' mean in day trading?

Accepted Answer

Buying a security expecting its price to rise

Answer

Going long means purchasing a security with the expectation that its price will increase, allowing you to sell at a profit.

Question 5

Which of the following best describes 'liquidity' in a stock?

Accepted Answer

The ease with which a stock can be bought or sold without affecting its price

Answer

Liquidity refers to how easily a security can be traded without causing significant price movement, typically measured by volume and bid-ask spread.

Day Trading Practice Test